By Jesse Slome
Despite all the negativity that surrounds long-term care insurance, I am optimistic about the year to come. Not Pollyannaish optimism, but one based on the recognition that significant changes are going to be good for long-term care insurance.
Let’s examine a few predictions for the coming year, marketplace changes and what it all can mean to you, the typical insurance professional working with Californians who are in their 50s, 60s and 70s.
WHAT MAKES ME POSITIVELY EUPHORIC?
California tops the nation in people 60 and older (I am one of them). The 60-plus population increased by 1.5 million in the last five years from 6.71 million in 2013 to 8.22 million in 2018. California’s senior population will continue to grow for the next decade.
Medi-Cal will continue to be the primary source of payment for long-term care services. Nationally, Medicaid pays $60 billion just for nursing homes. With the election behind us, expect more media coverage to focus on curtailing burgeoning entitlement programs. Aging Californians will grasp the fact that government programs are going to be more meager in the years ahead. They are not going to be willing to bet their future on expanded government entitlements. Rather, greater self-reliance and planning will be the mantra of many — all positive for future LTC sales.
Finally, we are starting to see newer approaches to traditional long-term care insurance products that are more in line with what consumers today want and are willing and able to afford. New policies have been introduced or are in the works from major insurers. If consumers buy, expect more insurers will follow suit.
Stability for Traditional LTC Insurance
Just over a decade ago (in 2005), some 525,000 Californians owned a traditional long-term care insurance policy. Annual policy sales in the state soared to over 75,000 policies.
Our projection is that total policy sales for the entire U.S. in 2018 will be around the 60,000 level. We expect that 2019 will be a year of stability and that alone will be good news for a much-beleaguered industry.
Rising interest rates are likely to have two good outcomes for the industry. First, premiums for new policy offerings should remain stable. Likewise, rising yields could help company bottom lines — good news for those concerned about ongoing rate increases and about seeing the few remaining companies exiting the business.
Dramatic Growth for Linked Benefit Products
Sales of these products continue to soar. Unfortunately, this is rarely reflected in consumer-oriented media coverage.
Our prediction is that the trend will continue for a variety of reasons. So long as the stock market doesn’t tank, legions of investment advisors and stock brokers will be pitching these products to their clientele. Compared to selling traditional LTCi, this is a relatively easy sale and it can be a lucrative way to move money from one bucket to another.
What is the role of stock market indices you may ask? When portfolios reflect gains, there’s no incentive for consumers to move money and, as a result, no income generated as a result of transactions. Thus, stockbrokers in record numbers are recommending linked-benefit options to their clients. Conversely, when markets tank, as they did in 2008, brokers aren’t calling clients for fear of having to explain portfolio losses.
Obviously, we can’t predict market direction when writing this in late 2018. But we can recommend strategies whichever direction the markets head in 2019. If markets continue to rise, being proficient in comparing various linked-benefit policies will be a way to compete with most brokers who only offer one option. If markets slump, knowing you are less likely to face competition from a client’s broker gives you a definite advantage when attempting to call new prospects to propose discussions about long-term care planning.
California Partnership: Too Little Too Late?
I was previously quoted on the front page of The Wall Street Journal touting the Partnership program as the single greatest way to affordably protect middle income Americans. And, I proudly helped launch the California Partnership program in the 1990s and was the first outside marketing consultant hired by the Department of Health services to promote the program.
So, while I was glad to see sorely needed changes to the California Partnership program, I don’t believe it will be enough to significantly turn the tide. For that to occur a significant commitment in terms of marketing dollars to create heightened consumer awareness is needed. I don’t see that coming from the State, from insurers nor from individual agents.
That said, on the bright side, California continues to permit agent mailings to solicit leads that look and feel like official State mailings. If they generate cost-effective results, one can expect the number of letters filling California mailboxes to increase. Awareness is the first step to rebuilding sales momentum.
Jesse Slome, a member of the 2019 Cal Broker editorial advisory board, is the founder and director of the American Association for Long-Term Care Insurance (www.aaltci.org) as well as the American Association for Medicare Supplement Insurance (www.medicaresupp.org). The organizations are headquartered in Westlake Village, California.